A. INTRODUCTION

In recent years, some of the most hotly
contested and expensive lawsuits in Canada have related
to employee overtime claims. Several of Canada’s largest
companies[1]
have been targeted in large class action lawsuits for non-payment
of overtime pay allegedly owing to employees and former
employees. Most employers, including charities and not-for-profits,
have employees who may work overtime and require compensation
for these extra hours. However, overtime rules under the
Ontario Employment Standards Act, 2000[2]
(the “ESA”) are rather complex and confusing. This Bulletin
will provide both an overview of the rules relating to overtime
and general comments to employers as to how to minimize
the risk of disputes regarding overtime claims.

B. OVERTIME PAY

In Ontario, provincially
regulated employers are subject to the overtime provisions
set out in the ESA and its regulations. Under the ESA, employees
who are not exempt from overtime pay must be paid overtime
for any hours worked in excess of 44 hours in a week, at
a rate of pay of at least 1.5 times the regular hourly rate.
These requirements are only minimum ESA entitlements. Therefore,
employees may have greater entitlements under their employment
contracts, whether these contracts are verbal or in writing.
It is always preferable to have employment contracts in
writing in order to avoid any uncertainty as to either the
employer’s or the employee’s rights.

An employee may also
be compensated for overtime by taking time off instead of
overtime pay at the rate of one and one-half hours of paid
time off work for each hour of overtime worked. Both the
employer and the employee need to agree to this form of
compensation. The paid time off work needs to be taken within
three months of the work week in which the overtime was
earned, or, with the employee’s agreement, within 12 months
of that work week.

When an employer and
an employee agree in writing, the overtime hours can be
averaged over a two week period or more. These agreements
must be approved by the Director of Employment Standards
at the Ontario Ministry of Labour.

It is important to note
that while the ESA states that employers cannot normally
require or commit an employee to work more than 48 hours
in a week, this weekly maximum does not affect the employer’s
legal duty to pay overtime after the employee works 44 hours
in a week.

C. OVERTIME EXEMPTIONS

ESA regulation 285/01[3] lists those persons and
categories of workers who are not subject to the overtime
rules. In addition to certain professionals, such as architects,
lawyers, professional engineers, public accountants, surveyors
and veterinarians, some exemptions that frequently are applied
include:

·Persons whose work is supervisory
or managerial in character and who may perform non-supervisory
or non-managerial tasks on an irregular or exceptional basis;

·Persons employed as students
to instruct or supervise children;

·Persons employed as a student
at a camp for children;

·Commissioned salespersons, other
than route salespersons, who normally make sales away from
the employer’s place of business; and

·Information technology professionals.

D.THE SALARIED EMPLOYEE

Employers are often
under the misconception that salaried employees are not
entitled to overtime. While many salaried employees may
fall within the supervisory or managerial exception referred
to above, this is not always the case. Therefore, unless
they fall within one of the statutory exceptions, salaried
employees are entitled to overtime pay. The rate of overtime
pay is calculated on the basis of dividing the employee’s
weekly salary by the number of hours regularly worked, and
multiplying that hourly rate by 1.5.

E.MANAGING THE RISK
OF OVERTIME

In light of the trend
for employees to claim what they perceive to be their due
compensation for overtime, employers must adopt strategies
to both assess their current exposure to and reduce their
future risk of employee overtime claims. Employer strategies
should include:

·Specify the number of hours
that the employee is to work in a written employment contract,
which should also specify the overtime threshold (keeping
in mind the minimum requirements of the ESA);

·Review your organization’s
current overtime policies to ensure that they are in compliance
with employment standards legislation;

·Communicate overtime policies
to employees and enforce these policies;

·If the organization has any
doubt, seek advice as to whether a particular employee or
category of employee is exempt or not from the overtime
rules;

·Make sure that employees
subject to overtime maintain and submit accurate records
of their hours of work on a weekly basis, including any
hours worked at home;

·Whenever possible, ensure
that overtime hours are authorized by management in advance,
and require employees to refrain from working overtime should
they fail to follow this policy;

·Maintain complete and accurate
records of actual hours worked;

·Properly manage the employees’
workload so that the work can be accomplished during regular
hours, rather than through more costly overtime hours; and

·Avoid any informal arrangements
regarding overtime with particular employees, which likely
would not be in compliance with the ESA.

F. CONCLUSION

Given the financial
risk to employers that could result from unpaid overtime
claims, not-for-profits and charities need to take a proactive
approach in managing employee overtime. As with other issues
involving the rights and duties of employers and employees,
attention to prevention of overtime disputes will reduce
the risk of costly overtime claims and will be conducive
to a more productive work environment.

DISCLAIMER: This Charity Law Bulletin
is a summary of current legal issues provided as an information
service by Carters Professional Corporation. It is current only
as of the date of the Bulletin and does not reflect subsequent changes
in the law. The Charity Law Bulletin is distributed with
the understanding that it does not constitute legal advice or establish
the solicitor/client relationship by way of any information contained
herein. The contents are intended for general information purposes
only and under no circumstances can be relied upon for legal decision-making.
Readers are advised to consult with a qualified lawyer and obtain
a written opinion concerning the specifics of their particular situation.